1) A company changes from percentage-of-completion to
\ncompleted-contract, which is the method used for tax purposes. The entry to
\nrecord this change should include a
\n A. debit
\nto Retained Earnings in the amount of the difference on prior years, net of
\ntax.
\nB. debit to Loss on Long-Term Contracts in the amount of the
\ndifference on prior years, net of tax.
\nC. credit to Deferred Tax Liability.
\nD. debit to Construction in Process.
\n2) Which of the following is accounted for as a change in accounting
\nprinciple?
\n A. A change from expensing immaterial expenditures to
\ndeferring and amortizing them as they become material
\nB. A change from the cash basis of accounting to the accrual basis
\nof accounting
\nC. A change in
\ninventory valuation from average cost to FIFO
\nD. A change in the estimated useful life of plant assets
\n3) A company changes from straight-line to an accelerated method of
\ncalculating depreciation, which will be similar to the method used for tax
\npurposes. The entry to record this change should include a
\n A. debit to Deferred Tax Asset.
\nB. debit to Retained Earnings in the amount of the difference
\non prior years.
\nC. credit to Deferred Tax Liability.
\nD. credit to Accumulated
\nDepreciation.
\n4) Presenting consolidated financial statements this year when
\nstatements of individual companies were presented last year is
\n A. an
\naccounting change that should be reported by restating the financial statements
\nof all prior periods presented.
\nB. an accounting change that should be reported prospectively.
\nC. NOT an accounting change.
\nD. a correction of an error.
\n5) During 2008, a construction company changed from the
\ncompleted-contract method to the percentage-of-completion method for accounting
\npurposes but not for tax purposes. The following lists include gross profit
\nfigures under both methods for the past 3 years:
\nCompleted-Contract
\nPercentage-of-Completion
\n2006
\n$ 475,000
\n$ 800,000
\n2007
\n625,000
\n950,000
\n2008
\n 700,000
\n 1,050,000
\n$1,800,000
\n$2,800,000<\/p>\n
Assuming an income tax rate of 40% for all years, the affect of this accounting
\nchange on prior periods should be reported by a credit of what?
\n A. $390,000 on the 2008 income statement
\nB. $600,000 on the 2008 income statement
\nC. $390,000 on the
\n2008 retained earnings statement
\nD. $600,000 on the 2008 retained earnings statement
\n6) On January 1, 2005, Baden Co. purchased a machine, which was its
\nonly depreciable asset, for $300,000. The machine has a 5-year life, and no
\nsalvage value. Sum-of-the-years’-digits depreciation has been used for
\nfinancial statement reporting and the elective straight-line method for income
\ntax reporting. Effective January 1, 2008, for financial statement reporting,
\nBaden decided to change to the straight-line method for depreciation of the
\nmachine. Assume that Baden can justify the change.
\nBaden’s income before depreciation, before income taxes, and before the
\ncumulative effect of the accounting change, if any, for the year ended December
\n31, 2008, is $250,000. The income tax rate for 2008, and for 2005 through 2007,
\nis 30%. What amount should Baden report as net income for the year ended
\nDecember 31, 2008?
\n A. $91,000
\nB. $60,000
\nC. $175,000
\nD. $154,000
\n7) The deferred tax expense is the
\n A. increase
\nin balance of deferred tax liability minus the increase in balance of deferred
\ntax asset.
\nB. increase in balance of deferred tax asset minus the
\nincrease in balance of deferred tax liability.
\nC. decrease in balance of deferred tax asset minus the
\nincrease in balance of deferred tax liability.
\nD. increase in balance of deferred tax asset plus the increase
\nin balance of deferred tax liability.
\n8) A company records an unrealized loss on short-term securities.
\nThis might result in what type of difference and in what type of deferred
\nincome tax?
\nType of Difference
\nDeferred Tax
\nOption 1
\nTemporary
\nLiability
\nOption 2
\nTemporary
\nAsset
\nOption 3
\nPermanent
\nLiability
\nOption 4
\nPermanent
\nAsset<\/p>\n
A. Option 2
\nB. Option 1
\nC. Option 4
\nD. Option 3
\n9) A company uses the equity method to account for an investment.
\nThis would result in what type of difference and in what type of deferred
\nincome tax?
\nType of Difference
\nDeferred Tax
\nOption 1
\nPermanent
\nAsset
\nOption 2
\nPermanent
\nLiability
\nOption 3
\nTemporary
\nAsset
\nOption 4
\nTemporary
\nLiability
\n A. Option 2
\nB. Option 1
\nC. Option 4
\nD. Option 3
\n 10) Nottingham Corporation had accounts receivable of $100,000
\non January 1st The only transactions affecting accounts receivable were sales
\nof $900,000 and cash collections of $850,000. What is the accounts receivable
\nturnover?
\n A. 6.6
\nB. 6.0
\nC. 9.0
\nD. 7.2
\n11) If a petty cash fund is established in the amount of $250, and
\ncontains $150 in cash and $95 in receipts for disbursements when it is
\nreplenished, the journal entry to record replenishment should include credits
\nto which of the following accounts?
\n A. Petty Cash, $100
\nB. Petty Cash, $75
\nC. Cash, $100
\nD. Cash, $95; Cash Over and Short, $5
\n12) If the month-end bank statement shows a balance of $36,000,
\noutstanding checks are $12,000, a deposit of $4,000 was in transit at month
\nend, and a check for $500 was erroneously charged by the bank against the
\naccount, what is the correct balance in the bank account at month end?
\n A. $28,500
\nB. $27,500
\nC. $43,500
\nD. $20,500<\/p>\n
13) If a short-term obligation is excluded from current liabilities
\nbecause of refinancing, the footnote to the financial statements describing
\nthis event should include all of the following information EXCEPT:
\n A. the terms of the new obligation incurred or to be
\nincurred.
\nB. the number of
\nfinancing institutions that refused to refinance the debt, if any.
\nC. the terms of any equity security issued or to be issued.
\nD. a general description of the financing arrangement.
\n14) Stock dividends distributable should be classified on the
\n A. balance sheet as an asset.
\nB. balance sheet as
\nan item of stockholders’ equity.
\nC. balance sheet as a liability.
\nD. income statement as an expense.
\n15) Which of the following items is a current liability?
\n A. Bonds due in 3 years
\nB. Bonds to be refunded when due in 8 months, there being no
\ndoubt about the marketability of the refunding issue
\nC. Bonds, for which
\nthere is an adequate appropriation of retained earnings, due in 11 months
\nD. Bonds for which there is an adequate sinking fund properly
\nclassified as a long-term investment, due in 3 months
\n16) A company borrows $10,000 and signs a 90-day nontrade note
\npayable. In preparing a statement of cash flows (indirect method), this event
\nwould be reflected as
\n A. a cash outflow from investing activities.
\nB. a cash inflow
\nfrom financing activities.
\nC. a cash inflow from investing activities.
\nD. an addition adjustment to net income in the cash flows from
\noperating activities section.
\n17) An increase in inventory balance would be reported in a
\nstatement of cash flows using the indirect method (reconciliation method) as
\n A. a
\ndeduction from net income in arriving at net cash flow from operating
\nactivities.
\nB. a cash outflow from financing activities.
\nC. a cash outflow from investing activities.
\nD. an addition to net income in arriving at net cash flow from
\noperating activities.
\n18) The primary purpose of the statement of cash flows is to provide
\ninformation
\n A. that is useful in assessing cash flow prospects.
\nB. about the entity’s ability to meet its obligations, its
\nability to pay dividends, and its needs for external financing.
\nC. about the cash
\nreceipts and cash payments of an entity during a period.
\nD. about the operating, investing, and financing activities of
\nan entity during a period.
\n 19) Eller Co. received merchandise on consignment. As of
\nJanuary 31, Eller included the goods in inventory, but did not record the
\ntransaction. What would be the effect of this on its financial statements for
\nJanuary 31?
\n A. Net income was correct and current assets were
\nunderstated.
\nB. Net income, current assets, and retained earnings were
\nunderstated.
\nC. Net income and current assets were overstated and current
\nliabilities were understated.
\nD. Net income,
\ncurrent assets, and retained earnings were overstated.<\/p>\n
20) Cross Co. accepted delivery of merchandise that it purchased on
\naccount. As of December 31, Cross had recorded the transaction, but did not
\ninclude the merchandise in its inventory. What would be the effect of this on
\nits financial statements for December 31?
\n A. Net income was correct and current assets were
\nunderstated.
\nB. Net income was overstated and current assets were
\nunderstated.
\nC. Net income was understated and current liabilities were
\noverstated.
\nD. Net income,
\ncurrent assets, and retained earnings were understated.
\n21) The failure to record a purchase of merchandise on account even
\nthough the goods are properly included in the physical inventory results in
\n A. an understatement of assets and net income.
\nB. an understatement
\nof cost of goods sold and liabilities and an overstatement of assets.
\nC. an overstatement of assets and net income.
\nD. an understatement of liabilities and an overstatement of
\nowners’ equity.
\n22) Fences and parking lots are reported on the balance sheet as
\n A. land
\nimprovements.
\nB. land.
\nC. current assets.
\nD. property and equipment.
\n23) Which of these is not a major characteristic of a plant asset?
\n A. Acquired
\nfor use in operations
\nB. Yields services over a number of years
\nC. Possesses physical substance
\nD. All of these are major characteristics of a plant asset.
\n24) The debit for a sales tax properly levied and paid on the
\npurchase of machinery preferably would be a charge to
\nA. a separate deferred charge account.
\nB. miscellaneous tax expense, which includes all taxes other
\nthan those on income.
\nC. the machinery
\naccount.
\nD. accumulated depreciation\u00e2\u0080\u0094machinery.
\n25) On November 1, 2007, Little Company purchased 600 of the $1,000
\nface value, 9% bonds of Player, Incorporated, for $632,000, which includes
\naccrued interest of $9,000. The bonds, which mature on January 1, 2012, pay
\ninterest semiannually on March 1 and September 1. Assuming that Little uses the
\nstraight-line method of amortization and that the bonds are appropriately
\nclassified as available-for-sale, what would the net carrying value of the
\nbonds be shown as on Little’s December 31, 2007, balance sheet?
\n A. $623,000
\nB. $622,080
\nC. $600,000
\nD. $632,000
\n26) On October 1, 2007, Lyman Co. purchased to hold to maturity, 200
\nof the $1,000 face value, 9% bonds for $208,000. An additional $6,000 was paid
\nfor accrued interest. Interest is paid semiannually on December 1 and June 1
\nand the bonds mature on December 1, 2011. Lyman uses straight-line
\namortization. Ignoring income taxes, what was the amount reported in Lyman’s
\n2007 income statement from this investment?
\n A. $4,020
\nB. $4,980
\nC. $4,500
\nD. $5,460
\n27) On October 1, 2007, Porter Co. purchased to hold to maturity
\n1,000 of the $1,000 face value, 9% bonds for $990,000 which includes $15,000
\naccrued interest. The bonds, which mature on February 1, 2016, pay interest
\nsemiannually on February 1 and August 1. Porter uses the straight-line method
\nof amortization. The bonds should be reported in the December 31, 2007 balance
\nsheet at a carrying what value?
\n A. $975,750
\nB. $990,000
\nC. $975,000
\nD. $990,250
\n28) Although only certain leases are currently accounted for as a
\nsale or purchase, there is theoretic justification for considering all leases
\nto be sales or purchases. The principal reason that supports this idea is that
\n A. at the end of the lease the property usually can be
\npurchased by the lessee.
\nB. a lease reflects
\nthe purchase or sale of a quantifiable right to the use of property.
\nC. all leases are generally for the economic life of the
\nproperty and the residual value of the property at the end of the lease is
\nminimal.
\nD. during the life of the lease the lessee can effectively
\ntreat the property as if it were owned by the lessee.
\n29) An essential element of a lease conveyance is that the
\n A. lessee provides a sinking fund equal to one year’s
\nlease payments.
\nB. property that is the subject of the lease agreement must be
\nheld for sale by the lessor prior to the drafting of the lease agreement.
\nC. lessor conveys
\nless than his or her total interest in the property.
\nD. term of the lease is substantially equal to the economic
\nlife of the leased property.
\n30) Which of the following is a correct statement of one of the
\ncapitalization criteria?
\n A. The lease contains a purchase option.
\nB. The lease transfers ownership of the property to the
\nlessor.
\nC. The lease term is
\nequal to or more than 75% of the estimated economic life of the leased
\nproperty.
\nD. The minimum lease payments, excluding executory costs,
\nequal or exceed 90% of the fair value of the leased property.
\n31) Discount on notes payable is charged to interest expense
\nA. only in the year the note is issued.
\nB. equally over the life of the note.
\nC. using the
\neffective-interest method.
\nD. only in the year the note matures.
\n32) The generally accepted method of accounting for gains or losses
\nfrom the early extinguishment of debt treats any gain or loss as
\n A. an amount that should be considered a cash adjustment
\nto the cost of any other debt issued over the remaining life of the old debt
\ninstrument.
\nB. an adjustment to the cost basis of the asset obtained by
\nthe debt issue.
\nC. an amount received or paid to obtain a new debt instrument
\nand, as such, should be amortized over the life of the new debt.
\nD. a difference
\nbetween the reacquisition price and the net carrying amount of the debt which
\nshould be recognized in the period of redemption.
\n33) A corporation borrowed money from a bank to build a building.
\nThe long-term note signed by the corporation is secured by a mortgage that
\npledges title to the building as security for the loan. The corporation is to
\npay the bank $80,000 each year for 10 years to repay the loan. Which of the
\nfollowing relationships can you expect to apply to the situation?
\n A. The balance of mortgage payable will remain a
\nconstant amount over the 10-year period.
\nB. The balance of mortgage payable at a given balance sheet date
\nwill be reported as a long-term liability.
\nC. The amount of
\ninterest expense will decrease each period the loan is outstanding, while the
\nportion of the annual payment applied to the loan principal will increase each
\nperiod.
\nD. The amount of interest expense will remain constant over
\nthe 10-year period.
\n34) Benton Company issues $10,000,000 of 10-year, 9% bonds on March
\n1, 2007, at 97 plus accrued interest. The bonds are dated January 1, 2007, and
\npay interest on June 30 and December. What is the total cash received on the
\nissue date?
\n A. $10,225,000
\nB. $9,700,000
\nC. $9,850,000
\nD. $9,550,000
\n35) Limeway Company issues $5,000,000, 6%, 5-year bonds dated
\nJanuary 1, 2007, on January 1, 2007. The bonds pay interest semiannually on
\nJune 30 and December 31. The bonds are issued to yield 5%. What are the
\nproceeds from the bond issue?
\n2.5%
\n3.0%
\n5.0%
\n6.0%
\nPresent value of a single sum for 5 periods
\n.88385
\n.88261
\n.78353
\n.74726
\nPresent value of a single sum for 10 periods
\n.78120
\n.74409
\n.61391
\n.55839
\nPresent value of an annuity for 5 periods
\n4.64583
\n4.57971
\n4.32948
\n4.21236
\nPresent value of an annuity for 10 periods
\n8.75206
\n8.53020
\n7.72173
\n7.36009<\/p>\n
A. $5,216,494
\nB. $5,000,000
\nC. $5,218,809
\nD. $5,217,308
\n36) A company issues $20,000,000, 7.8%, 20-year bonds to yield 8% on
\nJanuary 1, 2007. Interest is paid on June 30 and December 31. The proceeds from
\nthe bonds are $19,604,145. Using effective-interest amortization, how much
\ninterest expense will be recognized in 2007?
\n A. $1,560,000
\nB. $780,000
\nC. $1,568,498
\nD. $1,568,332
\n37) Which of the following is not a characteristic of a
\ndefined-contribution pension plan?
\n A. The
\nbenefits to be received by employees are defined by the terms of the plan.
\nB. The employer’s contribution each period is based on a
\nformula.
\nC. The accounting for a defined-contribution plan is
\nstraightforward and uncomplicated.
\nD. The benefit of gain or the risk of loss from the assets
\ncontributed to the pension fund are borne by the employee.
\n38) In accounting for a defined-benefit pension plan
\n A. the employer’s responsibility is simply to make a
\ncontribution each year based on the formula established in the plan.
\nB. an appropriate
\nfunding pattern must be established to ensure that enough monies will be
\navailable at retirement to meet the benefits promised.
\nC. the expense recognized each period is equal to the cash
\ncontribution.
\nD. the liability is determined based upon known variables that
\nreflect future salary levels promised to employees.
\n39) The interest on the project ( help with nursing paper writing from experts with MSN & DNP degrees)ed benefit obligation component of
\npension expense
\n A. reflects
\nthe rates at which pension benefits could be effectively settled.
\nB. reflects the incremental borrowing rate of the employer.
\nC. is the same as the expected return on plan assets.
\nD. may be stated implicitly or explicitly when reported.
\n 40) Windsor Company has outstanding both common stock and
\nnonparticipating, noncumulative preferred stock. The liquidation value of the
\npreferred is equal to its par value. The book value per share of the common
\nstock is unaffected by
\n A. the declaration of a stock dividend on common stock
\npayable in common stock when the market price of the common is equal to its par
\nvalue.
\nB. a 2-for-1 split of the common stock.
\nC. the declaration of a stock dividend on preferred payable in
\npreferred stock when the market price of the preferred is equal to its par
\nvalue.
\nD. the payment of a
\npreviously declared cash dividend on the common stock.
\n41) Dividends are not paid on
\n A. nonparticipating preferred stock.
\nB. Dividends are paid on all of these.
\nC. noncumulative preferred stock.
\nD. treasury common
\nstock.<\/p>\n
42) Assume common stock is the only class of stock outstanding in
\nthe B-Bar-B Corporation. Total stockholders’ equity divided by the number of
\ncommon stock shares outstanding is called
\n A. par value per share.
\nB. market value per share.
\nC. book value per
\nshare.
\nD. stated value per share.
\n 43) Preparation of consolidated financial statements when a
\nparent-subsidiary relationship exists is an example of the
\n A. relevance characteristic.
\nB. neutrality characteristic.
\nC. economic entity
\nassumption.
\nD. comparability characteristic.
\n44) In presenting segment information, which of the following items
\nmust be reconciled to the entity’s consolidated financial statements?
\nOperating Revenue
\nIdentifiable Profit (Loss)
\nAssets
\nOption 1
\nYes
\nYes
\nYes
\nOption 2
\nNo
\nYes
\nYes
\nOption 3
\nYes
\nNo
\nYes
\nOption 4
\nYes
\nYes
\nNo<\/p>\n
A. Option 2
\nB. Option 4
\nC. Option 1
\nD. Option 3
\n45) Presenting consolidated financial statements this year when
\nstatements of individual companies were presented last year is
\n A. an accounting change that should be reported
\nprospectively.
\nB. NOT an accounting change.
\nC. a correction of an error.
\nD. an accounting
\nchange that should be reported by restating the financial statements of all
\nprior periods presented.<\/p>\n","protected":false},"excerpt":{"rendered":"
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